At the time of this writing of the third edition of Fraud 101,

the U.S. economy is facing extraordinary challenges. Wall

Street and the entire global economic and financial system are

in steep decline, and the economy is in a worldwide recession.

Financial institution Lehman Brothers recently filed for

bankruptcy, the insurance giant AIG is in dire financial straits

and required taxpayer bailouts to survive, and the mortgage

giants Fannie Mae and Freddie Mac are in deep jeopardy. The

U.S. federal government approved a historic funding package

of up to $750 billion in stimulus payments to be made to various

financial markets and industries in distress with the goal of

stimulating the economy. Payments to date appear to have had

little impact with no proven results on the economy.

In one of the most egregious cases in history, Bernard Madoff,

a financier and investment manager, recently admitted to

embezzling more than $50 billion of investors’ funds through an

elaborate Ponzi scheme he perpetrated. Allegedly, the money

he paid to early investors was from funds received from subsequent

investors, and when too many investors demanded

their funds in response to the failing economy, the scheme

collapsed. Although Ponzi schemes are common and have

occurred many times in history, Madoff’s scheme is the largest

Ponzi scheme ever. The dimension of fraud cases is becoming

unfathomable—multi-millions and even billions are becoming

commonplace.